William & Mary Environmental Law and Policy Review

Volume 16 | Issue 2 Article 4

Why Corporations Should Adopt the Valdez

Principles
Mary Ellen West

Repository Citation
Mary Ellen West, Why Corporations Should Adopt the Valdez Principles, 16 Wm. & Mary Envtl. L. &
Pol'y Rev. 99 (1992), https://scholarship.law.wm.edu/wmelpr/vol16/iss2/4

Copyright c 1992 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository.
https://scholarship.law.wm.edu/wmelpr
WHY CORPORATIONS SHOULD ADOPT THE VALDEZ
PRINCIPLES

MARY ELLEN WEST*

The Valdez Principles ("Principles"), a set of ten guidelines that

govern the environmental practices of corporations, was created by the
Coalition for Environmentally Responsible Economies ("CERES") "after
the Roman goddess of agriculture."' CERES is a coalition of
environmental groups, investment groups, institutional investors,
government agencies, and economists that was founded in 1989. The
group draws on the experience of many of its members in shareholder
proposal matters,2 and its influence is enhanced by the fact that
member institutional investors control over $150 billion in assets. 3
The goal of CERES in promoting the Valdez Principles is to
"create a voluntary mechanism of corporate self-governance that will
maintain business practices consistent with the goals of sustaining our
fragile environment for future generations, within a culture that respects
all life . . . ." CERES hopes the Principles will provide a minimum
environmental standard to be used by pension fund, individual,
religious, and college endowment investors in their investment
decisions.5

B.S. Cornell University, 1987; J.D. Mawshall-Wythe School of Law, College of

Willaim and Mary,1992.
1. Barnaby J. Feder, Who Will Subscribe to the Valdez Principles?,N.Y. TIMES,
Sept. 10, 1989 at 6, col. 1. The Principles were inspired by the Sullivan Principles, which
provide guidance to U.S. corporations doing business in South Africa, and the MacBride
Principles, which address corporate issues relating to religious discrimination in Northern
Ireland. Laura L. Castro, A Matter of Principles; Companies and Environmental
Awareness, NEWSDAY, Sept. 8, 1989 at 47 (Nassau and Suffolk ed.).
2. Art Kleiner, Who Owns Exxon? We Do, GARBAGE, May-June 1991 at 56.
3. Robert D. Rosenbaum & Michael E. Korens, Trends in InstitutionalShareholder
Activism: What the Institutionsare Doing Today, in CORPORATE LAW 1990,45 (PLI Litig.
& Admin. Practice Course Handbook Series No. 704 (1990)).
4. Joan Bavaria, Business, Clean Up Your Environmental Act; Withholding
Investments Can Influence CorporateActions, NEWSDAY, Sept. 7, 1989 at 5 (Nassau and
Suffolk ed.).
5. Daniel H. Pink, The Valdez Principles:Is What's Good for America Good for
General Motors?, 8 YALE L. & POL'Y REV. 180, 188 (1990).
100 WM. & MARY JOURNAL OF ENVIRONmENTAL LAW [Vol.16:99

The Principles actually were written before the 1989 oil spill6
but were christened the "Valdez Principles" memorialize the grounding
of the Exxon Valdez tanker on Bligh Reef where 110,000 barrels of
crude oil leaked into Alaska's pristine waters.7 CERES used the
anniversary celebration of Earth Day in 1990 to publicize the Principles
and to submit shareholder proposals to dozens of corporations to
encourage adoption and compliance. 8
After a review of the Principles, this article will analyze the
advantages and disadvantages to corporations considering adoption. The
author concludes that corporations committed to environmental reform
and interested in the accompanying economic benefits should adopt the
Valdez Principles.

THE PRINCIPLES

The Valdez Principles9 ask companies to agree to the following

statements:
1. Protection of the biosphere.
We will minimize and strive to eliminate the release of any pollutant that
may cause environmental damage to the air, water or earth and its inhabitants.

6. Crocker Snow, Jr., Putting Mother Earth in the Boardroom, WORLDPAPER, June
1990, at 15.
7. Joan Bavaria, CERES co-chair, said: "We're not Exxon-bashing .... We wish
to memorialize the accident at Valdez so that we won't have it happen again." Castro,
supra note 1, at 47.
The spill, the United States' largest, killed thousands of birds, mammals, and fish,
and devastated the Alaskan coastline. Linda Kanamine, Exxon to Pay $25 Million More
in Spill Deal, USA TODAY, OCt. 1, 1991 at IA.
Initially, the Exxon Valdez's captain, Joseph Hazelwood, bore the blame for the
spill. Although Hazelwood was accused of drinking before operating the supertanker, he
was acquitted by a jury of operating the ship while intoxicated. Hazelwood is currently
appealing his conviction of negligent discharge of oil. Id. Others believe that such a spill
was inevitable, due to cost-cutting measures implemented by corporations like Exxon. See
Dennis Drabelle, The Sound of Disaster; Before and After the Exxon Valdez Fiasco,
(Book Review) WASH. POST, Apr. 26, 1991 at B3 (final ed.).
The spill has induced extensive negotiation and litigation. Negotiations between
Exxon and the federal government resulted in a much criticized deal where Exxon entered
a plea of guilty to misdemeanor environmental violations in exchange for its payment of
criminal and civil fines of $1 billion. Kanamine, supra this note.
8. Stephen C. Jones & Brad A. De Vore, CompaniesEye Valdez Principles;10-Point
Code, NAT'L L.J., Sept. 2, 1991 at 23.
9. Coalition for Environmentally Responsible Economies, Valdez Principles (Sept.
7, 1989), reprintedin The Text of the Valdez Principles,NAT'L L.i., Sept. 2, 1991 at 24.
1992] VALDEZ PRINCIPLES

We will safeguard habitats in rivers, lakes, wetlands, coastal zones and oceans and
will minimize contributing to the greenhouse effect, depletion of the ozone layer,
acid rain, or smog.
2. Sustainable use of natural resources.
We will make sustainable use of renewable natural resources, such as
water, soils and forests. We will conserve non-renewable natural resources
through efficient use and careful planning. We will protect wildlife habitat, open
spaces and wilderness while protecting biodiversity.
3. Reduction and disposal of waste.
We will minimize the creation of waste, especially hazardous waste, and
wherever possible recycle materials. We will dispose of all wastes through safe
and responsible methods.
4. Wise use of energy.
We will make every effort to use environmentally safe and sustainable
energy sources to meet our needs. We will invest in improved energy efficiency
and conservation in our operations. We will minimize the energy efficiency of
products we produce or sell.
5. Risk reduction.
We will minimize the environmental, health and safety risks to our
employees and the communities in which we operate by employing safe
technologies and operating procedures and by being constantly prepared for
emergencies.
6. Marketing of safe products and services.
We will sell products or services that minimizes [sic] adverse
environmental impacts and that are safe as consumers commonly use them. We
will inform consumers of the environmental impacts of our products or services.
7. Damage compensation.
We will take responsibility for any harm we cause to the environment by
making every effort to fully restore the environment and to compensate those
persons who are adversely affected.
8. Disclosure.
We will disclose to our employees and to the public incidents relating to
our operations that cause environmental harm or pose health or safety hazards.
We will disclose potential environmental, health or safety hazards posed by our
operations, and we will not take any action against employees who report any
condition that creates a danger to the environment or poses health and safety
hazards.
9. Environmental directors and managers.
At least one member of the Board of Directors will be a person qualified
to present environmental interests. We will commit management resources to
implement the Principles, including the funding of an office of vice president for
environmental affairs or an equivalent executive position, reporting directly to the
102 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol.16:99

CEO, to monitor and report upon our implementation efforts."0

10. Assessment and annual audit.
We will conduct and make public an annual self-evaluation of our
progress in implementing these Principles and in complying with all applicable
laws and regulations throughout our world-wide operations. We will work toward
the timely creation of independent environmental audit procedures which we will
complete annually and make available to the public.

THE ADVANTAGES OF SIGNING ON To THE VALDEZ PRINCIPLES

There are four main advantages to a corporation that agrees to
adopt the Valdez Principles. First is the positive publicity that
substantially could help a corporation's image in the eyes of its
shareholders and consumers in this age of "green consumerism." Second,
corporations will experience reduced costs associated with waste hauling
fees, coupled with potential revenues generated by recycling in accordance
with the Principles. Third, corporations that voluntarily strengthen their
environmental standards may avoid financially devastating environmental
disasters. The fourth advantage to corporations adopting the Valdez
Principles is favorable investment in that corporation by CERES members.

1. The Value of an Environmentally Responsible CorporateImage

CERES has promoted the Valdez Principles in ways calculated to
bestow upon signatories public image benefits. The approach to
convincing companies to become Valdez signatories included an organized
"media blitz" focused on the anniversary celebration of Earth Day in 1990.
CERES has also indicated its intent to conduct environmental compliance
ratings of both Valdez signatories and non-signatories, and to broadcast
their findings in a second media campaign."
Another factor that may encourage corporations to sign on to the
Valdez Principles is the political, economic and media clout of the
sponsor.1 2 Among CERES members are some of the country's most
influential environmental groups such as the National Wildlife Federation,
the Sierra Club, and the National Audubon Society, which collectively

10. Considering the fact that Ralph Nader proposed the then controversial
"constituency director" idea in 1976, this idea is hardly unfamiliar to the corporate
community. RALPH NADER, MARK GREEN & JOEL SEUGMAN, TAMING THE GIANT
CORPORATION (1976).
11. Jones & De Vore, supra note 8,at 23.
12. Id.
19921 VALDEZ PRINCIPLES

claim ten million members. Also included in CERES' ranks are the
pension funds of California and New York City and over 250 Catholic and
Protestant church groups." Some of these groups have expressed a
willingness to exert economic pressure, such as consumer boycotts, on
corporations that fail to adopt the principles or at least address their
concerns.1 4 Potential lost profits from boycotts, possible loss of
investment money, and the public relations nightmare of dealing with
negative publicity generated by CERES are problems that a company could
avoid by voluntarily signing on to the Valdez Principles."
Additionally, The Council on Economic Priorities has agreed to
publicize information generated by environmental audits done under the
Valdez Principles. 6 The Council publishes a guide which summarizes
the social responsibility of corporations so that consumers can contemplate
purchases in a more socially conscious manner.' 7 Inclusion of
environmental audit information could help corporations gain positive
recognition by consumers who read the Council's popular and widely
circulated shopper's handbook. 8
Organizers of the effort are keenly aware of the need for
recognition of corporations that adopt and comply with the Valdez
Principles. Joan Bavaria, a prominent organizer, stressed that CERES is
trying to develop rewards for companies who have progressive
environmental programs. 9 These rewards may come in the form of
favorable publicity among shareholders and consumers, which could
develop into a valuable competitive tool for the adopting corporation. 20
No business concerned with its public image in this decade can help but
be intrigued by the goodwill benefits that inure to a corporation adopting

13. Kleiner, supra note 2, at 56.

14. Feder, supra note 1, at 6.
15. Jones & De Vore, supra note 8, at 23.
16. Feder, supra note 1, at 6.
17. Id.
18. Id. Alice Tepper Marlin, a vigilant environmentalist who formed the Council in
1969, heads the Council on Economic Priorities. This group publishes SHOPPING FOR A
BETTER WORLD and THE BETrER WORLD INVESTMENT GUIDE, books which educate
consumers on things such as grocery products' impact on the environment and the social
responsibility of corporations' business policies. Robert Cooke, Newsday Student Briefing
Page on the News, NEwsDAY, Apr. 25, 1991 (Nassau and Suffolk ed.).
19. Feder, supra note 1, at 6.
20. Id.
.104 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol.16:99

the Valdez Principles.2 1

Consumers often use the projected environmental image of a
company-to make decisions on what products to buy. This is the concept
of "green consumerism." While some downplay this phenomenon as
merely an attempt by the marketing industry to use a novel approach to
sell the same products found on store shelves for years, 22 a recent survey
discovered that a large majority of consumers polled would be willing to
pay more for products they viewed as environmentally responsible.23
Additionally, investment funds that screen out stocks of
environmental polluters or that seek to buy stock in firms that are involved
in revolutionary energy generation methods have sprung up and are
performing well.u The fact that these types of funds succeed financially,
however, is not a surprise to those who believe that "environmentally
sound policies are fiscally sound policies . . . ." Such funds are
capitalizing on a recent offspring of "NIMBY" (Not In My Back Yard)
environmental activism that has been labeled "NIMP" or "Not In My

21. Furthermore, this change in consumer attitudes is not confined to the United
States. Surveys in Britain and Canada found that consumers use the environmental
responsibility of products and manufacturers as a factor in their purchasing choices.
Nationwide Survey Shows: American Consumers Going 'Green,' as Environment Plays
Large Role in Purchases,PR NEWSWIRE, July 20, 1989.
22. Anita Manning, Sales Are Ringing Up For Ecology-Friendly Products, USA
TODAY, Mar. 21, 1990 at 5D.
23. "Environmental concerns are having a profound effect on consumer behavior.
...When it comes to the environment, American consumers are -- to a surprising extent -
- putting their money where their mouths are." Most Shoppers Lean to 'Green,'
SUPERMARKET NEWS, Sept. 11, 1989 at 20. A survey by the Michael Peters Group found
that 89% of Americans are concerned about the environmental impact of the products they
buy and that 77% say that a company's reputation for environmental responsibility
influences their purchasing decisions. Most significant is the statistic that 78% of those
polled said they would be willing to pay more for something sold in recyclable or
biodegradable packaging. Id.
24. Examples of green investment funds include New Alternatives, Schield
Progressive Environmental Fund, Merrill Lynch Eco-Logical Trust, Fidelity Select
Environmental Services, Freedom Environmental and Kemper Environmental. Ronit A.
Rose, Environmental Investing, GARBAGE, Sept.- Oct. 1990 at 48.
25. Nicholas Boyle, SEC Dismisses Exxon's Attempts to Remove 'Valdez Principles'
From ShareholderProxy, BOND BUYER, March 11, 1991 at 28. As of October 1990 there
were 14 investment funds with "some type of environmental component." Returns on
these 14 funds bettered the average return for all equity mutual funds during the first half
of 1990. Rose, supra note 24, at 48.
1992l VALDEZ PRINCIPLES 105

Portfolio" activism.'
Increased media exposure as an environmentally responsible
corporation in the decade of "green consumerism" will work to the
advantage of signatories of the Valdez Principles as both consumers and
investors look beyond traditional measures of valuation and include in their
calculus the environmental costs and benefits to society.

2. Reduced Waste Hauling Costs and Recycling Revenues

Companies with progressive environmental policies have received
unexpected economic benefits in the form of reduced expenses for waste
removal and added revenues from the sale of recycled materials.
Corporations that adopt the Valdez Principles may also see these types of
benefits because the third Principle mandates that signatories reduce waste
and recycle whenever possible.
The company that produces Claussen Pickles provides an instructive
example. In 1987, the distribution manager decided to buy a cardboard
baler for $10,000Y In four months, the baler had paid for itself through
decreased costs for waste removal coupled with income from the sale of
the cardboard for recycling.' Claussen now recycles metal caps, glass
and plastic jars from its packaging plant, and hopes to convince farmers
to buy rejected cucumbers for feed or fertilizer." The estimated savings
to Claussen from reduced waste hauling fees total $150,000 a year."°
Hyatt Hotels similarly reaped unexpected benefits when it instituted
a recycling plan. To please environmentally conscious employees the hotel
chain implemented an environmental policy in its 106 offices and hotels
worldwide.3 Hyatt trained employees to recycle cardboard, aluminum
and glass, thereby saving the corporation $2 million in one year, primarily
as a result of decreased waste hauling fees.32
Such examples suggest that corporations that adopt the Valdez
Principles at least will experience reductions in garbage removal expenses.
Not only will signatories benefit from their environmentally conscious

26. Mary Lowengard, IR and the Environment: Lean, Mean and "Green," PUB.
RELATIONS J., Apr. 1991 at 8.
27. Martha Engber, Waste Watchers, CHiCAGO TRmuNE, Aug. 25, 1991 at 3.
28. Id.
29. Id.
30. Id.
31. Id.
32. Id.
106 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol.16:99

public image, they will reap financial rewards as well.

3. PresentDedicationof FinancialResources to the Environment Will

Lead to Long Term Savings
By adopting the Valdez Principles, corporations may evade future
environmental accidents and their financial effects. Admittedly, the
adoption of the Valdez Principles would force a company to dedicate
significant financial resources to environmental compliance. Yet short
term costs should result in the reduction of a company's long term
exposure to environmental liability.3
The extent of corporate environmental liability can be staggering.
For example, Exxon suffered a decrease in earnings of $1.68 billion due
to expenses for cleanup, restoration and litigation after the 11 million
gallon oil spill in Alaska.' 4 The criminal fine entered against Exxon as
a result of this spill was $1.25 million. In March of 1991, Exxon
agreed to pay $1.1 billion in damages for this single environmental
catastrophe. 6
Corporate decision makers should recognize the prudence of
accepting the costs of environmental protection programs that may avert
such massive liability. Such decisions, if made in accordance with the
Valdez Principles, may receive unexpected support. Shareholders
increasingly are realizing that they bear much of the risk of corporate
environmental disasters and the ensuing financial ramifications.37 In
addition, many people, including pension fund managers, believe that a
corporation's bottom line success is not only a function of revenues and
expenses, but of how the business is run as well.3 8
The traditional maxim that "an ounce of prevention is worth a

33. Jones & De Vore, supra note 8, at 6.

34. Nicholas Boyle, New York City Pension System Appeals to Exxon ForAdoption
of Environmental 'Valdez' Code, BoND BUYER, Dec. 3, 1990 at 2.
35. Kanamine, supra note 7, at IA.
36. Janin Friend, Exxon Back on Firing Line, DALLAS TIMES HERALD, April 20,
1991, § B at 1. Critics of Exxon's bargain believe that the spill killed more wildlife and
produced more long-term damage than originally anticipated. Some question whether the
huge sum of $1.1 billion is enough to make Exxon feel the pinch. Id.
37. Dennis J. Block, Stephen A. Radin & Michael J. Maimone, Institutional
Investors: Passive Fiduciariesto Activist Owners, in CORPORATE LAW 1990, at 161 (PLI
Litig. & Admin. Practice Course Handbook Series No. 704 (1990)).
38. Nicholas Boyle, Expanding Assets, New-Found Activism Cast Long Shadows
Over the Boardroom, BoND BUYER, July 23, 1990 at IA.
 19921 VALDEZ PRINCIPLES 107
pound of cure" may well hold true in the context of corporate
environmental policy. In light of the tremendous liabilities produced by
environmental mishaps, corporations balancing the costs of adopting the
Valdez Principles must realize that in the long run they may gain through
avoided accidents and increased support from shareholders and outsiders.

4. Favorable treatment of Valdez signatoriesby CERES

Another advantage for Valdez Principles signatories is that pension
fund managers who are CERES members may look favorably on investing
in signatories' stock. The Principles themselves have been described as
"both a stick and a financial carrot for a new corporate consciousness."39
As such, the adoption of the Valdez Principles should reward signatories
with investment dollars while non-signatories risk the withdrawal of
investments because of perceived environmental insensitivity.'
The membership of pension funds in CERES indicates that this type
of financial rewarding and punishment could indeed take place. Although
individual pension funds may lack clout with certain corporations,41 the
fact that American employees annually set aside billions of dollars in over
50,000 pension funds42 indicates the potential influence of such funds'
investment practices. For example, the New York City Employees
.Retirement System has actively pressured Exxon to adopt the Valdez
principles.43 Additionally, in 1989, pension fund administrators used their
influence to persuade Exxon to put an environmentalist on its board,"

39. Bavaria, supra note 4, at 5.

40. Id.
41. The New York City Employees Retirement System, when it asked Occidental
Petroleum and Champion International to abide by the Valdez Principles, owned $16.3
million shares of Occidental and $5.5 million shares of Champion. In each case, however,
the pension fund owned less that 0.002% of all stock outstanding. Boyle, supra note 38,
at 2. Additionally, when pension funds from California, Massachusetts and New York
City assembled to ask Exxon to adopt six environmental policies, in aggregate they
controlled only 2% of Exxon's stock. Boyle, supra note 38, at IA.
42. Kleiner, supra note 2, at 56.
43. Boyle, supra note 25, at 28.
44. Robert D. Rosenbaum & Michael E. Korens, InstitutionalShareholderActivism
and Related Proposalsfor Legislative and Regulatory Changesto Corporate Governance
Rules, in CORPORATE LAW 1990, at 621 (PLI Litig. & Admin. Practice Course Handbook
Series No. 696 (1990)). The director appointed to represent environmental interests on
Exxon's board was marine scientist John Steele. Marcia Parker, Oil Spill Rallies Funds;
3 Seek Supportfor EnvironmentalCode, PENSIONS &INVESTMENT AGE, September 18,
1989 at 1.
108 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol.16:99

and in 1990, several pension funds threatened a battle to remove the board
if Exxon did not agree to increase its commitment to environmental
45
protection.

THE DISADVANTAGES OF ADOPTING THE VALDEZ PRINCIPLES

Corporate America, especially publicly held companies, have given
the Valdez Principles a cool reception. The group of U.S. signatories to
date is comprised of small, privately held corporations. 4" The reluctance
of major companies may be explained by the disadvantages to adoption of
the Valdez Principles.
These perceived disadvantages are dominated by the corporate fear
of increased liability for environmental mishaps. In addition, critics cite
as disadvantages such things as excessive costs associated with compliance
and reporting, and the fear of negative publicity. Many corporations
considering the Principles have balked at the public disclosure
requirements and the mandatory appointment of an environmental director.
Still other corporations refuse to adopt the Valdez Principles, claiming to
have environmental policies specific to their activity or industry. These
corporations believe that adoption of the Valdez Principles would duplicate
their own efforts and that industry specific policies better fit their needs.

1. The Bottomless Pit of Liability?

Many corporations believe that the major disadvantage to adoption
of the Valdez Principles is the possibility of increased liability. Some
corporations claim that to adopt the Principles is to admit that they are part
of the environmental problem, publicly conceding their role in the
ecological deterioration of our planet.47
One fear is that disclosures required under the eighth Principle that
admit to environmental weaknesses will incur increased liability.48 A

45. Rosenbaum & Korens, supra note 44, at 621.

46. Louise Kehoe, Business and the Environment; The Tide Has Turned After Exxon
Valdez, FINANCIAL TIMES, March 27, 1991, §1 at 17. According to Ms. Kehoe, only 22
U.S. companies have so far adopted the Valdez Principles. Id.
47. Pink, supra note 5, at 191.
48. Kehoe, supra note 46, at 17. Peter Huber of the Manhattan Institute for Policy
Research feels that even a suggestion of environmental difficulty could be a "magnet for
lawsuits." Elizabeth S. Kiesche, Facing Up to Hidden Liabilities, CHEM. WEEK, Feb. 14,
1990 at 58. The litigation burden already is high; there were more than 170 lawsuits filed
against Exxon in connection with the Valdez oil spill. Harry Berkowitz, Shareholders'
19921 VALDEZ PRINCIPLES

corporation also may be legally impaired by the seventh Principle, which

calls for voluntary assumption of blame for any injury to individuals or the
environment. While signatories may be willing to own up to their
mistakes, many opponents of the Principles believe that the Principles'
ambiguous language and broad terms will subject corporations to unknown
and possibly unlimited liability.49
Some commentators are quick to point out that voluntary adoption
of the Valdez Principles does not legally obligate the corporation in any
way.50 Others disagree and warn that adoption of the principles could be
interpreted by courts to impose extra legal duties on the signatory.51
Under this reasoning, a corporation's potential liability easily could surpass
liability that could be imposed by common law or statute.52
Fears about additional liability caused by adoption of the Valdez
Principles seem misplaced considering the fact that many corporations
already have in place policies that conform to the dictates of the principles.
Any additional liabilities that could be imposed on a Valdez signatory
could just as easily be imposed on a company that has its own
environmental policy that goes above and beyond existing laws.
Furthermore, those who suggest that additional legal duties will be
imposed on Valdez Principles signatories offer only vague grounds for
their fears.53

2. Costs of Compliance; Negative Publicity

In the debate over General Motors' adoption of the Valdez

Votes Back Exxon, NEWSDAY, Apr. 26, 1990 at 15. CERES understands corporate
concerns about liability, but counters that the "bottomless pit" arguments are misleading;
CERES simply wants companies to face up and accept accountability for the
environmental harm they create. Cheryl Hogue, Lawyers Differ On Wisdom of Adopting
'Valdez Principles'for Corporate Conduct, 40 Toxics L. REP. (BNA) 1276 (Mar. 13,
1991).
49. Jones & De Vore, supra note 8, at 23.
50. Hogue, supra note 48, at 1276.
51. James P. O'Brien, an environmental attorney, believes that companies could be
taking on legal duties not explicitly enumerated in the principles themselves. He
analogizes the adoption of the Valdez Principles situation to a line of insurance cases
where the court found that insurance companies' voluntary inspection bestowed a duty on
the company even though the inspection was not meant to benefit the public. Id.
52. Jones & De Vore, supra note 8, at 23.
53. See supra note 51.
110 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW (Vol.16:99

Principles,' the chairman of the Board of Directors argued against the

Principles by likening them to federal clean air regulations that allegedly
cost the company billions of dollars but result in minimal environmental
benefits. 55 Under this view, voluntary acceptance of the Valdez
Principles and the ensuing costs of compliance would be economically
irrational. Some commentators, however, question the accuracy of such
cost/benefit appraisals and believe that the environmental benefits
including the cost of accidents unquestionably outweigh the costs of
preventive environmental practices.'
Another disadvantage cited by corporations is the fear of negative
publicity. Although CERES has structured the Principles so that
corporations can use their adoption as a media tool, there are those who
fear that increased public scrutiny would result. Recognizing that no
company has an absolutely clean environmental record, the fear has been
expressed that "signatories might receive negative publicity for problems
they are working on while non-signatories whose problems are less public
would escape notoriety."' This fear is misplaced, however, since the
credibility presumably gained by adoption and adherence to the principles
should ensure fair public treatment of signatories that suffer any
environmental accidents.

3. Disadvantagesof Disclosure
The opponents of the Valdez Principles mention as a disadvantage
the required public disclosure of environmental concerns regarding
corporate operations. Statutes currently compel companies to submit to
extensive disclosure, and many are not willing to voluntarily obligate
themselves further.58 CERES is also aware of opposition that may come
from those who believe that the mandated disclosure could interfere with
5 9 In addition, Thomas
the confidentiality of new product development.
P. Grumbly, president of Clean Sites Inc., predicts that the disclosure

54. Shareholders rejected the proposal 90.9 percent against, 9.1 percent in favor.
Environment, GM Shareholders Reject Adoption of Valdez Environmental Principles,
DAILY RPT. FOR EXECUTIVES (BNA) No. 102, at A-I (May 28, 1991).
55. Id.
56. Berkowitz, supra note 48, at 15.
57. Feder, supra note 1, at 6.
58. Id.
59. Howard Fine, Stockholder Proposals 'Greening' Companies, ORANGE Co.
BUSINESS J. July, 2, 1990, § 1 at 6.
19921 VALDEZ PRINCIPLES

required by the Principles could lead to an increase in the number of

personal injury cases filed against the adopting corporations.' CERES
co-chairperson Joan Bavaria rebuts the arguments that the required
disclosure would be prohibitively burdensome for corporations. She likens
environmental disclosure to the financial disclosures that corporations are
6
continually forced to, and do make, without much difficulty. '

4. Environmental Directoron the Board

When the Amoco Corporation ("Amoco") resisted the recent
shareholder proposal suggesting that it adopt the Valdez Principles, it
indicated that one of the reasons for its opposition was the requirement of
an "environmental" directorship. 2 Amoco announced its contempt for the
idea of constituency directors in its proxy statement: "Special interest
directorships, environmental or otherwise, are . . . bad policy from the
standpoint of corporate governance."' 3
In another case, the American Electric Power Company ("AEP")
opposed the idea of an environmental director and they fought the
inclusion of a Valdez Principles shareholder proposal based on Securities
& Exchange Commission ("SEC") Rule 14a-8(c)(6)." AEP argued that
the Principles would require them to nominate candidates with
environmental qualifications.6 Fortunately for the proponents of the
Valdez Principles, the SEC disagreed with AEP and compelled them to
include it on the proxy.6
Corporations clearly view the requirement that they place a person
to represent environmental interests on the board as a disadvantage of the
Valdez Principles. 7 Opponents feel that constituency directors will lose

60. Clean Sites, Inc. is a Washington, DC based non-profit organization that assists
parties involved in superfund cleanups. Hogue, supra note 48, at 1276.
61. Id.
62. Amoco Opposes EnvironmentalProxy Proposal,REUTERS, Apr. 3, 1991.
63. Id.
64. This regulation allows corporations to omit shareholder proposals if they relates
to the election of directors. Power Company May Omit ProposalOn Valdez Principles,
23 SEC. REG. & L. REP. (BNA), No. 4 at 131 (Jan. 25, 1991).
65. Id.
66. Id.
67. However, Exxon (and others) actually have placed an environmental director on
their boards. Mark Alpert, The Shareholder Who Roared, FORTUNE, June 19, 1989 at
161.
112 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol. 16:99

sight of the most important group, the shareholders.68

Yet, the claim by corporations that environmental directors will be
unable to appropriately represent shareholders is unconvincing. Such an
argument ignores the reality that state legislatures have endorsed the use
of constituency directors by enacting statutes to allow corporate boards to
do exactly that, and to be concerned about other interests including
employees, customers, communities, and the environment. 69 Shareholder
interests, moreover, may be best served by having someone on the board
who, in addition to looking to increase shareholder dividends, can
represent environmental interests and ensure that analysis of corporate
problems properly takes into account environmental costs and benefits.

5. Substitute Policies
Some corporations have resisted adopting the Valdez Principles
because they believe that their own environmental policies are adequate
and that adoption of an additional set of guidelines would be
counterproductive. For example, Waste Management asserted that its own
"Environmental Principles" embody a more powerful statement of
environmental procedures than the Valdez Principles.70 Waste
Management's environmental record, however, suggests that its principles
are either not as powerful as the corporation believes or that it is not
complying with its own guidelines. Waste Management has committed
numerous regulatory and criminal environmental infractions and has paid
large sums in fines and settlements. 1
Arco Chemical ("Arco") is another corporation that has shunned the
Valdez Principles in favor of a different set of environmental standards.
Arco instead adopted the Responsible Care initiative formulated by the

68. A.A. Sommer, Jr., Corporate Governance In the Nineties: Managers vs.
Institutions,59 U. CIN. L. REV. 357, 378 (Fall 1990).
69. Robert S. Karmel, CaIPERS Versus the Business Roundtable,'N.Y.LJ., Feb. 21,
1991 at 3.
70. Waste Management is the world's largest environmental services company.
Waste Management's Board opposed the stockholder proposal calling for the company to
adopt the Valdez Principles. Waste Management Stockholders Elect Four Members to
Board of Directors,PR NEWswiRE, May 10, 1991.
71. Since 1980, Waste Management has paid fines and settlements of $18.5 million,
and $5 million more, over the past 20 years, in criminal fines. Rose, supra note 24, at 48.
19921 VALDEZ PRINCIPLES

Chemical Manufacturers Association"2 specially for the chemical industry.

According to Lodwrick M. Cook, Chairman of Arco: "We believe that the
goal of a safe and environmentally sound chemical industry can most
effectively be achieved by implementing this industry-specific program
rather than the more general Valdez Principles."73
Commentators, however, have criticized of the Chemical
Manufacturers Association's initiative as vaguely worded corporate double-
talk.74 CERES supports the goals of Responsible Care but dislikes the
fact that the program's advisory board has no real power." In addition,
CERES stresses the need for an objective, outside party to monitor a
corporation's environmental performance.76
The Securities and Exchange Commission has remained loyal to its
practice of generously allowing inclusion of environmental proposals and
has mandated inclusion of Valdez Principles proposals even though the
corporation already has environmental guidelines. 77 While many
corporations see the Valdez Principles as a wasted, duplicative exercise,
the fact remains that if corporate environmental practices were as
successful as they are believed to be, proponents of the Valdez Principles
would not be advocating their adoption.

CONCLUSION
According to Thomas P. Grumbly, president of Clean Sites Inc.,
"The Valdez Principles are 'the wave of the future' ..... This is what the

72. The Chemical Manufacturers Association was formed after the tragedy in Bhopal,
India where 3,000 people died as a result of a chemical accident at a Union Carbide
subsidiary plant. Snow, supra note 6, at 15; K. Heller, Public Outreach: The Stakes Are
High, CHEM. WEEK, July 17, 1991 at 81.
73. Arco Chemical's New CEO Sees Opportunities,PR NEWSWIRE, May 9, 1991.
74. Scott M. Slaba, When US CorporationsGo 'Green' - Watch Out, CHRISTIAN
SCIENCE MONITOR, May 18, 1990 at 19.
75. Hogue, supra note 48, at 1276.
76. Id.
77. Sommer, supra note 68, at 378. Dow Chemical argued that it could omit a
shareholder proposal of the Valdez Principles because their own set of environmental
standards made the proposal moot. Under the Securities & Exchange Commission's Rule
14a-8(c)(10), a shareholder proposal may be omitted from a company's proxy statement
if the issue it addresses is moot. The SEC disagreed and said that it could not determine,
from the information that was provided, that the company's existing policies were in
keeping with the policies embodied in the Valdez Principles. Staff Rules on Proxy
Proposalson ShareholderApproval, Environment, 23 SEC. REG. & L. REP. (BNA) No.
11 at 422 (Mar. 15, 1991).
114 WM. & MARY JOURNAL OF ENVIRONMENTAL LAW [Vol. 16:99

public wants. 7 8 This article has attempted to provide a rational argument

for why corporations should respond to such public sentiment and adopt
the Valdez Principles.
The view has been expressed that American corporations will
eagerly adopt the Valdez Principles only when their influence goes
"directly and forcefully to a corporation's primary interest -- the bottom
line. 79 In fact, the Valdez Principles do address the bottom line in terms
of lessened expenses and increases in sales and revenues. First,
corporations, by adopting the Principles, will reap the benefits of the rising
tide of "green consumerism." According to Jacquelyn Ottman, president
of J. Ottman Consulting, consumers are starting to "shop corporations
instead of brands."8' She believes that the creation of the "green"
shopper is just the beginning of a long trend, and that corporations'
revenues soon will begin to reflect the public's response to their
environmental responsibility or irresponsibility."
Second, corporations that adopt the Valdez Principles will enjoy
additional economic benefits. Expenses will decrease for items like waste
removal, and recycling may actually bring in extra revenue. Furthermore,
corporations that pledge money to environmental safety today will see
future returns when potential accidents are avoided or their severity
lessened.
While a few U.S. corporations readily have adopted the Valdez
Principles, many reject the Principles for a variety of reasons, including:
perceived potential increases in liability and costs; a resistance to public
disclosure requirements and environmental directorships; and an adherence
to inadequate environmental policies. Such arguments have been made
forcefully, but all are ineffectual and imply that their proponents simply
are not interested in environmental reform.

78. Hogue, supra note 48, at 1276.

79. Pink, supra note 5, at 192.
80. J. Ottman Consulting is a New York City firm that offers consulting services for
companies interested in creating environmentally sensible policies. Lowengard, supra note
26, at 8.
81. d.